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Tiffany's (TIF) Q2 Earnings Likely to Increase: Here's Why


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Tiffany & Co. TIF is slated to report second-quarter fiscal 2018 results on Aug 28. In the trailing four quarters, this designer, manufacturer and retailer of jewelry and other items has outperformed the Zacks Consensus Estimate by an average of 12%. In the last reported quarter, the company delivered a positive earnings surprise of 35.7%.

Investors are counting on another estimate beat by Tiffany in the to-be-reported quarter. Let's delve deeper and take a look at the factors that will be influencing the results.

How Are Estimates Faring?

After registering a bottom-line increase of more than 50% in the first quarter of fiscal 2018, Tiffany is likely to record year-over-year growth of roughly 9% in the second quarter. The Zacks Consensus Estimate for the quarter under review is pegged at $1.00 compared with 92 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the last 30 days. Analysts polled by Zacks now project revenues of $1,039 million, up from $959.7 million in the year-ago quarter.

If all goes well, the company is likely to surpass the Zacks Consensus Estimate for both the top and bottom lines for the fifth straight quarter.

Tiffany & Co. Price, Consensus and EPS Surprise

Tiffany & Co. Price, Consensus and EPS Surprise | Tiffany & Co. Quote

Which Factors Hold Key to Tiffany's Performance?

Strategic Endeavors Undertaken to Lift Sales

Tiffany is well positioned to augment its top and bottom-line performance in the long run by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. The company is also looking at other revenue generating avenues. It also intends to expand distribution network by adding stores in both new and existing markets. The company is focused on opening smaller stores that offer selected collections of lower priced higher-margin product, which in turn boosts store productivity.

The company is gradually coming up with new jewelry designs, range of watches and fragrance. It has also introduced "build-your-own program" on its website under which customers are allowed to personalize their charm bracelets. Further, Tiffany is allowing customers to customize rings. Apart from this, the company renewed its licensing agreement with Luxottica Group - slated to expire on Dec 31, 2027 - for the development, production and global distribution of sunglasses and prescription frames.

Margins May Remain Under Pressure

Despite the company's efforts to bolster the top line, rising SG&A expenses may dent operating margin. In this regard, we note that management expects fiscal 2018 SG&A expenses to increase at a rate higher than sales on account of increased spending on technology, marketing communications, visual merchandising, digital and store presentations. We noted that in the first, second, third and fourth quarter of fiscal 2017, SG&A expenses had increased 0.2%, 3.7%, 3.3% and 2.2%, respectively. During the first quarter of fiscal 2018, SG&A expenses rose 9.1% year over year.

Model Predicts Lower Probability of Earnings Beat

Our proven model does not conclusively show that Tiffany is likely to beat earnings estimates this quarter. This is because a stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Tiffany has a Zacks Rank #3 but an Earnings ESP of -0.67%. Consequently, making surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

The Michaels Companies, Inc. MIK has an Earnings ESP of +0.94% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

PVH Corp. PVH has an Earnings ESP of +0.16% and a Zacks Rank #3.

American Eagle Outfitters, Inc. AEO has an Earnings ESP of +2.98% and a Zacks Rank #3.

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Tiffany & Co. (TIF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: AEO , TIF , MIK , PVH



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